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Net Expansion refers to the growth in revenue from existing customers, taking into account upgrades, downgrades, and churn. It’s a key performance metric that helps gauge the health of a business, particularly in a subscription-based model.
A positive net expansion rate indicates that the revenue gained from existing customers (through upselling, cross-selling, or price increases) exceeds the revenue lost through downgrades or churn. This demonstrates not only customer satisfaction but also the effectiveness of your customer success strategies. On the other hand, a negative net expansion rate signals that you're losing more revenue through downgrades and churn than you're gaining from existing customers, indicating a potential issue that needs addressing.
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